Case Law Details
Erode Medical Centre Vs State Tax Officer-2 (Madras High Court)
In a recent legal development, the Madras High Court addressed a contentious issue concerning GST liability on a rent-free canteen facility at Erode Medical Centre. The petitioner challenged an order dated 27.03.2024, alleging lack of proper application of mind by the authorities.
The crux of the petitioner’s argument was centered around two main points. Firstly, it was contended that the assessment order erroneously alleged non-payment of tax on the sale of medicines, despite the medicines being sold by separate entities—EMC Pharmacy (HUF) and EMC Pharmacy, a partnership firm—that had already remitted the requisite taxes. Secondly, the order imposed GST on the premises used for a canteen facility that was provided rent-free to benefit hospital visitors. The petitioner had clarified in their reply that no rent was charged for this service.
The court examined the records and noted that these crucial aspects, including the clarification regarding the sale of medicines and the rent-free nature of the canteen facility, were not adequately considered in the impugned order. In light of this failure to properly address the petitioner’s submissions, the court set aside the order dated 27.03.2024.
Consequently, the Madras High Court remanded the matter back to the assessing authority for reconsideration. The court directed the respondent to provide the petitioner with a reasonable opportunity, including a personal hearing, and instructed them to issue a fresh order within three months from the receipt of the court’s order.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
In this writ petition, an order in original dated 27.03.2024 is impugned on the ground of non application of mind. Upon receipt of show cause notice dated 19.01.2023, the petitioner replied on 08.01.2024. The impugned order dated 27.03.2024 was issued thereafter.
2. Learned counsel for the petitioner referred to the impugned order and pointed out that defect no.1 related to alleged non payment of tax in respect of the sale of medicines. During this assessment period, he submits that medicines were not sold by the petitioner. They were sold either by EMC Pharmacy (HUF) or EMC Pharmacy, a partnership firm. He further submits that both these entities collected and remitted taxes in respect of such sales. Since the impugned order was issued without taking this aspect into account, in spite of the petitioner pointing it out in reply dated 08.01.2024, he submits that interference with the order is necessary. He also points out that the order deals with the imposition of tax on premises that the petitioner permitted a third party to use for running a canteen. Although the petitioner stated in the reply that rent was not collected in respect thereof so as to provide an additional facility to persons visiting the hospital, he submits that the tax proposal was confirmed by not taking such reply into account.
3. Mr. C. Harsha Raj, learned Additional Government Pleader, accepts notice for the respondent. As regards this assessment period, he submits that the factual aspects as to the identity of the supplier of medicines may be required to be reconsidered.
4. The petitioner has placed on record prima facie evidence that supplies were made by either EMC Pharmacy (HUF) or EMC Pharmacy, a partnership firm, during the relevant period. The invoices issued by the said entities indicate that tax was collected. It is asserted in the affidavit and in the petitioner’s reply that such taxes were remitted to the Government. As regards tax on rent, the petitioner has asserted that no rent was collected since it was intended as an additional facility for persons who visit the hospital. Since these aspects were not taken into account while issuing the impugned order, the matter requires reconsideration.
5. Therefore, the impugned order dated 27.03.2024 is set aside and the matter is remanded for reconsideration. After providing a reasonable opportunity to the petitioner, including a personal hearing, the respondent is directed to issue a fresh order within three months from the date of receipt of a copy of this order.
6. The writ petition is disposed of on the above terms without any order as to costs. Consequently, connected miscellaneous petitions are closed.
Author Bio
